Is Now the Time to Invest in Direct Lending? (US)

Investors are increasingly turning to private credit in the quest for higher and more stable returns.

According to P&I,1 asset owners are embracing a range of private credit strategies, including “sale-and-leaseback, revolving credit facility, structured credit, European tactical credit, and direct lending in response to market conditions.” Given recent market uncertainty, investors may be wondering how these assets would perform under stressed scenarios, such as increased market volatility or a default cycle.

Aon focuses on direct lending as one of the larger private credit strategies available to investors. By analyzing available data and using our experience with direct lending managers, we find that direct lending protects capital as well as or better than public credit markets through various stressed scenarios while continuing to provide excess returns over a long horizon.

Download the full whitepaper above to learn more. 


1 P&I article dated December 9, 2019: “More asset owners clamoring for multi-strategy private credit”


About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
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The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc. (“AHIC”). The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto.

This document is not intended to provide, and shall not be relied upon for, accounting, legal or tax advice or investment recommendations. Any accounting, legal, or taxation position described in this presentation is a general statement and shall only be used as a guide. It does not constitute accounting, legal, and tax advice and is based on AHIC’s understanding of current laws and interpretation.

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon AHIC’s preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. AHIC disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. AHIC reserves all rights to the content of this document. No part of this document may be reproduced, stored, or transmitted by any means without the express written consent of AHIC.

Aon Hewitt Investment Consulting, Inc. is a federally registered investment advisor with the U.S. Securities and Exchange Commission. AHIC is also registered with the Commodity Futures Trading Commission as a commodity pool operator and a commodity trading advisor, and is a member of the National Futures Association. The AHIC ADV Form Part 2A disclosure statement is available upon written request to:
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Appendix:
Index Definitions

The Cliffwater Direct Lending Index (CDLI): This index seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements. The CDLI Total Return Index includes three components: Income Return, Realized Gain/ Loss, and Unrealized Gain/Loss.

S&P/LSTA Leveraged Loan Index: An index designed to track the marketweighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments.

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